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QUERY DESK

This is a limited access to the Query Desk, where we share some of the Queries we have answered. These are not recommendations, but a casual chat between a client and his advisor.

Client

21, Feb 19

Query

Subject: small cap index corrected approx 70% in 2008

Hi Amit 

I want to know our market(Sensex) was flat from 1992 ---2002 .....what was the reason and can we expect this type of no return for a longer time in future.

In 2008 small cap index was down by 70% so 100 rs becomes 30rs so it will take 3-4 yr to recover the principal . so in this condition one has to wait for atleast 10 yr to get good return.  

main question is that ...... can this be happen in future like 70% correction type and no return of sensex for approx 10 yr because this is one aspect of equity market too. we need to know the flip side too.

Admin Reply

07, Mar 19

Hi Sir,

 1992 to 2002 you are right the markets were flat & why did this happen? - Between 1989 to 1992 the Sensex between up 11x i.e. from 350 to 4400 (Harshad Mehta)..The Markets are always mean reverting in the Long term .. 

 

Question 2 - In 2008 small cap index was down by 70% so 100 rs becomes 30rs so it will take 3-4 yr to recover the principal . - Sir the BSE small cap index was 7000 in 2007, it went & hit 14000 in 2008 & then went down to 3000 in 2009 but hit a high of 11000 in 2010.. It is true that SmallCap index is super volatile but it always pays to do a SIP here rather than lump sum

 

Question 3 - can this be happen in future like 70% correction type and no return of sensex for approx 10 yr because this is one aspect of equity market too. we need to know the flip side too. - For a 70% Correction, you need a 500-800% upmove.. It can happen but large corrections happen after a Large mad rally.. 

Client

10, Jan 19

Query

Subject: Regarding intraday strategy tips

Hi Sir, 

I need your opinion regarding intraday trading.. 

I am a multibagger member of stallion and will always be with the aim of 10x in 10 years.. 

I am seeing a company a1.... tips. com which gives reliable intraday tips with good returns monthly claiming to doule my money in a year in intraday basis.. Do you recommend if i allocate 10 percent of my portfolio in this? 

 

Admin Reply

24, Jan 19

Hi Sir,

Stallion Asset doesnt Support or Recommend Intraday Trading, please use the below for education purpose only. 

 

I am a Chartered Market Technician (USA) and backtested atleast 1000+ technical Strategies. Now some of the things we learn is pure junk and needs to removed from our heads.

So i have learned various strategies from Various traders.

A) 2004–2009- I was a Trader (student) and went bankrupt a couple of times. That’s was my biggest learning curve, i understood that in Financial Market its what not to do that is more important than what to do. (Risk Management)

 

B)  2010- A Bank -White Guy who would wear a hat to office at Bank and always a yellow Tie(London). He had 10 coffees a day. He waited for Black Swans, he was always long volatility. He would buy deep out of the money options and hold it in various markets around the globe. (THATS IT) He believed that markets always underestimated volatility, and believe me i have seen his equity curve, it was unbelievably amazing. In last 10 years, he had only 4 losing Quarters and that he had never had a negative return. The trick is to diversify, because you will be wrong in 8 out of 10 trades as the options expire worthless, but the 2 trades you make money in, that would be more than sufficient

 

C) 2011 - Brokerage House - I have already shared this strategy on Qoura and i personally am 100% confident on this one cause i have used it for years. The one which i used to personally use was TRADING THE GAP. I have BackTested this strategy in various markets including the Nifty futures stocks, S&P 500 and FTSE 100.

Since i used it a lot in Indian Stock Markets, i will be using Indian data for this for the Answer. The Idea is to find out companies that will have a trend day or a large candle either Black (down) or White (up)

We are Hunting for a Trend Day, which is a very recurring pattern in the Stock Market. This is what a trend day looks like.

  1. 9.15 a.m.–9.25 a.m. - Find Stocks that Have opened with a GAP up or Down of more than 2%. Out of 200 FNO stocks, you have cut down your selection criteria to 3–4 stock. There is some news in this stock, or some large investor wants to buy large quantities in this stock and hence the GAP.
  2. 9.25 a.m–9.30a.m. - There will be 3 data point available 1) Volume. 2)High 3) Low. Volume has to be higher than previous days volume in 10–15 mins. Now keep a buying Stop Loss above the days High.Example yesterday stock A closed at 100, today it opened at 103 and in the first 10 mins made a low at 102.55 and High of 103.5. As soon as it crosses its 15 minute high of 103.5 buy it.
  3. 9.30am–3.30pm - Once the Buy order is triggered, Keep days low, or weighted average price (available on all trading software like zerodha, Sharekhan etc for free) as your Stop Loss. Keep Riding the stock until its 3.15 or your trailing stop loss is triggered.

Thats it, Very easy strategy with mind blowing results . This works on the Reverse Side as well when the stock opens down 2%, thought the results are better if you do it long only.

We have done a blacktest of this strategy taking for 1,000 trades and i have used it extensively when i was a trader.

The Results for the long only data were as follows

Trade Win% after Transaction Cost- 48%

Trade Loss% after Transaction Cost- 52%

Profit per Trade - 2.3%

Loss Per Trade- 0.7%

You have a automated Stop loss which is your weighted average price, as price of the stock increases during the day, so does your weighted average price (Stop loss). Use this system for a month, i never faced a draw down of more than 10% in my trading career.

You might be thinking if i was such a good trader, why did i move to start my company Stallion Asset which is into Long term investments?

This Strategy works only if you have less than 20–30 Lakhs rupees, because after that you start affected the volume of the stock, the stoploss doesn’t get triggered properly.

Client

27, Nov 18

Query

Subject: Technical View of the market

Hi!

Can you share your opinion about Nifty, DJIA and Emerging Market index in terms of Elliot Wave Principle and if we can make any correlations from them?

Do you think Nifty might be on the verge of a H&S pattern (10900-1000 peak of right shoulder) ?

Thanks!

 

Admin Reply

12, Dec 18

Hi Sir,

Well MSCI EEM should have bounced back from 36-38 levels and that support level held on and 29th October 2018 MSCI EEM made a Bottom of 37.57.. As expected the Dow Jones have fallen more than the EEM, for example between 3th October & today the Dow Jones has fallen to 10% Whereas the MSCI EEM has fallen 5%.. Emerging Markets are a lot further in the bear market compared to Developed Markets. 

 

I believe Midcaps should outperform large caps now, today was an Interesting day, the markets had so so so so much bad news but we close well in positive territory after opening at days low, market bought into fear.. If for 2-3 more days market can sustain to close above 10500, it should be a very good for midcaps.. 

 

I am not 100% Confident that the US Markets have bottomed out as the leaders of the Bull Market have topped out only 3 months back though the Meeting of FED would decide what would happen next in the short term.. 

 

Client

31, Oct 18

Query

Subject: PSU banks time to take a call

Hi Amit,

is it time to take a contra call on PSU banks. Trading .5-.7 p/ b, this cld give decent returs. I was checking indian bank, vijaya which hv reported net profit all along and union bank has turned positive since last two qrts. Yr take please.

tks and rgds

Admin Reply

17, Nov 18

Hi Sir,

I do respect the screen a lot and the screen loves corporate banks like ICICI bank, Axis Bank.. I am not betting on PSU's in this product.. We have a clear strategy of 3-5x Profits in 5 years, no compromise on that with good promoter quality.. 

Client

25, Oct 18

Query

Subject: Sunflag opinion

Hi Amit 

Can you tell us ur opinion about sun flag in steel sector.

There are lot of positive points about this stock like good equity by debt ratio, tHey have only been in loss once in 13 years, they have a JV with diado steel and very good cash flow.

 

Admin Reply

17, Nov 18

Hi Sir,

I am positive on Steel also, though the Markets hate it.. We ofcourse dont have any positions in Either Momentum or Multibagger in Steel since last 4 months but i believe Market is now drunk on quality companies... 

 

There is nothing wrong in being in quality companies but the valuations are insane for some of them.. If you have a 100% High Quality portfolio of 20 stocks, i believe 10-12 of them will underperform the market in next 5 years if they dont grow at more than 15%.. 

 

Market is paying 50-60 PE for 10% growth is out of my understanding unless the ROE is more than 100% or sustainable growth is more than 25%.. You can make a great deal of Money in the stock market either by being smart or just by being a little less stupid..

 

Coming to Sunflag, I dont track it so closely but Steel should do really well i believe for next 2 years (ofcourse its a commodity and things change fast here) and the risk reward is very favourable here.. 

 

There are 3 kinds of Business, money can be made in all three of them.. 

1) A Good Business Model in a Good Time (Get your Valuation Right here)

2) A Good Business Model in a Bad time (Being Patient is Important)

3) A Bad Business Model in a Good time (Remember to Exit Well)

Client

05, Sep 18

Query

Subject: NBFC warnings from Uday kotak

Hello Amit

https://economictimes.indiatimes.com/industry/banking/finance/lenders-sitting-in-the-lap-of-disaster/articleshow/65679230.cms

Uday Kotak is warning and has been right in the past. Fact of the matter is demon and GST did created upheavel in working of msme sector. We cant take him lightly. We are hugely invested in finance sector as such these warnings are of paramount importance to us. your views ?

 

Admin Reply

27, Sep 18

Hi Sir,

I spoke to Rashesh at length and even deepak (head of credit at edelweiss) and even from my understanding with Kapil from DHFL is that there are no problems on the Asset side, Loan to Value is at 45% for the Industry for LAP whereas it was 72% in 2008 in India, Gold Finance LTV in 2011 was 81%, so dont see credit risk in Retail yet! 

Client

21, Aug 18

Query

Subject: Mahindra holidays for long term

Hi ,

I have visited a couple of Mahindra holiday resort.

I was shocked to see that their resorts were fully occupied during weekday off season time.

Can you give your views on the financials and the valuations of the company .

Admin Reply

05, Sep 18

Hi Sir,

One of the top management person of Mahindra Holidays is our client (Recently left his Job), he told me that the product is just not sellable and great companies dont sell products, customers buy it. You open a D-Mart in any place and people would come, You launch a Godrej Properties project in any place and people will come but mahindra holidays is a difficult sell. 

 

He told me Mahindra Takes 6 lakhs upfront for 1 week of holiday Plus 14000 a year annual fees. The Problem is that Indian consumers are smart, they calculate the cost of capital with 12% interest rate i.e. 6 Lakh * 12%= 72,000 + 14000 as annual fees = 86000/Year. 

 

You can get most 5 stars in India for 7 days at less than 86000/year.. In a consumer product business, you need to have your consumers like you. 

Client

10, Aug 18

Query

Subject: Your video on edelweiss is very good

Dear Amit,

I am working for a one of the wealth management company (Your video of edelweiss got circulated in the entire company), i completed reading the entire question desk today and i am just amazed how much you know about so many stocks/Sector at this age. Hope you can keep enlightening the community with the same passion. I don't have a question today but delighted to be part of this community. 

 

 

Admin Reply

28, Aug 18

Hi Sir,

Thanks Much! You can share more about the wealth management Industry in the next query if your comfortable. I personally Believe wealth Management Industry is at a huge Tipping point, every business happens with these 3 things "Convince, Make the Sale and then Deliver better than expectations".

 

I believe Wealth Management as a industry now convinced people about Investing in Financials Assets, The Sale is happening and will grow, the delivery of Returns is the most important thing now. In Market More Money comes with More Returns at a Higher Valuation, the game is always the same. Good Luck !

Client

17, Jul 18

Query

Subject: Trying to understand Global Trends

Hi!

You've mentioned a couple of times that FAANG Stocks are the leaders of this bull market. There are a few data point that I would like to mention here and perhaps you could help all of us understand it better. -  Amazon, Microsoft, Netflix & Apple are responsible for more than 80% of the upside in S&P in 2018.  According to Bank of America - excluding just the five FAANG stocks, the S&P 500 return in H1 would have been -0.7%. 

16th July - Netflix reported earnings and they seem to have missed their earnings mark and cracked about 10% in pre-market session. You've mentioned Bull Markets are fueled by earnings growth. Do you think this might be the start of the end of the FAANG bull market? Also, in one of your answers you mentioned that US still is the most influential market - do you think that contagion effects would be felt in India as well severely. 

Also, I read in some cases that the Bond Market is able to give early signals about recessions. There are a couple of articles indicating that Bond Yields are inverting which signaling recessions. What are your views on the bond market and the inverting bond yields - do you think it might correlate to the bull market leaders missing their earning expectations (Netflix).

You have continously mentioned that India is on it's way to become a $5 trillion Economy by 2025(28).  You've mentioned that you're super bullish long term and a little bearish in the medium term (unclear due to political uncertainity in India). Do you think we could see a very significant crash in the next 3 years owing to global issues?

Apologies for such a long query but I hope I can get some perspective and learn from your ideas!

Thank you very much

 

 

Admin Reply

31, Jul 18

Hi Sir,

Thats a Complex Question to be honest because Netflix and Now even Facebook fell 20% 2-3 days back and even twitter on friday fell 20%. I am Tracking Facebook very closely and facebook after the Fall is exactly at the same level as it was in may2018. There was just too much extra euphoria which was built in. The Results were super for facebook but on concall the CFO said "expenses would rise going forward to due privacy and growth may slow a little". 

 

Facebook made a Panic Low and a double bottom at 150, i think markets would wait for next quarter before bidding facebook higher. The Range is now between 150-195 for it and a break in either direction would decide the trend. 

 

Indian Markets need a Leader to move up as the breakout has just happened. My bet is that with 46% revenue growth this quarter, the Leader can be Reliance Industries. There would be new Sector Trends that would be created, i believe it would be a B2C company probably but not very clear signs yet. 

 

World Recession i dont know or understand so much but you need to look at the FANGS, they will tell you where the S&P500 is heading. Google is making new highs, Amazon is Still making new Highs, apple also at new highs whereas Facebook is the same level as it was in May2018, Netflix was 200 at start of January 2018, even after the correction it is at 355, a 80% gain, not bad at all! 344 is a important support for Netflix, lets see!

Client

19, Jun 18

Query

Subject: Emerging Asia sees biggest foreign investor exodus since 2008

Dear Amit and team,

What is your opinion on this article.. Is it time to apply more adverse steps to reduce risks? Do you think until the next general elections, we should park the money oin a safer instrument like debt??

https://timesofindia.indiatimes.com/business/india-business/emerging-asia-sees-biggest-foreign-investor-exodus-since-2008/articleshow/64641715.cms

regards

Admin Reply

29, Jun 18

Hi Sir,

The Emerging Market Index (MSCI EEM) Gave a Breakdown 3 days back below 45$, i think  intermediate top is done there. Hangsang couldnt sustain above 32000 (2008 highs) and now breaking down. The MSCI EEM has to consolidate a lot before breaking out because i see serious drawdowns of 15-16% for global funds there. I think emerging markets are over-rated and i cant find one emerging market which is doing great things. 

 

See there will be new Trends starting, there will be growth, we will do well dont worry too much about emerging market trends. Every change creates an opportunity to make 3-10x gains, we are getting smarter and won't miss opporunities. Trends are more clear in a bear market, because the valuations are understandable and its very clear. 

 

Dont worry too much, the more market falls, the more times we will go higher. As on Today our Portfolio is down 8.5% YTD, i will get it back from them and a lot lot more believe me. There is nothing different in this fall, this will happen to us a lot of times in the 10-20 years but we need to focus on our strategy.

 

A lot of retail guys will be out of market and will promise never to invest again, Its always the same. In a journey toward wealth creation, we have entered a rough spot i.e. i call it a Jungle on the way. 

 

i remember what Ray Dalio the Largest Hedge Fund Manager says "In order to have a great life you have to cross a dangerous jungle. You can stay safe where you are and have an ordinary life, or you can risk crossing the jungle to have a terrific life. How would you approach that choice? Take a moment to think about it because it is the sort of choice that, in one form or another, we all have to make." 

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